UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] Quarterly report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 2006
----------------
Commission File Number: 000-25947
Biochem Solutions Inc.
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(Name of Small Business issuer in its Charter)
Florida 65-0386286
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(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
Bay & Deveax Streets Nassau, Bahamas PO Box CR-5464
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(Address of Principal Executive Offices) (PO Box)
(242) 328-1110
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(Issuer's Telephone Number)
Securities registered under Section 12(b) of the Exchange Act:
NONE
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, no par value
Check whether the issuer: (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[ ] YES [X] NO
Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B is contained in this form, and no
disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference or any amendment to this Form
10-QSB. [ ]
The issuer is a developmental stage company, and as such has yet
to generate any substantial revenues.
The aggregate market value of the voting stock held by non-
affiliates of the registrant was not determinable due to lack of
trading.
As of November 15, 2006 the issuer had approximately 10,029,000
shares of common stock outstanding.
Documents incorporated by reference: NONE
Transition Small Business Disclosure Format (check one):
[ ] YES [X] NO
Biochem Solutions, Inc.
Form 10-QSB Index
Page
Part I: Financial Information 1
Item 1. Financial Statements 1
Condensed Consolidated Balance Sheet - June 30, 2006 1
Condensed Consolidated Statements of Operations -
Three months ended June 30, 2006 and 2005 2
Condensed Consolidated Statements of Operations -
Three months ended June 30, 2006 and 2005 3
Condensed Consolidated Statements of Cash Flows -
Three months ended June 30, 2006 and 2005 4
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis or Plan of
Operation 13
Part II: Other Information
Item 1. Legal Proceedings 16
Item 2. Change in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Subsequent Events 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
Biochem Solutions, Inc.
And Subsidiary
(A Development Stage Company)
Condensed Consolidated Balance Sheet
(Unaudited)
June 30, 2006
Assets
------
Current assets:
Cash $ 41
-----------
Total current assets 41
Property and equipment, net 1,926
-----------
Total assets $ 1,967
===========
Liabilities and Stockholders' Deficiency
----------------------------------------
Current liabilities:
Accounts payable $ 197,104
Accrued expenses 982,958
Due to related parties 269,554
Notes Payable - related party 226,466
Notes payable 173,415
-----------
Total current liabilities 1,849,498
Stockholders' deficiency:
Series 2001 convertible preferred stock 42,470
Series 2001A convertible preferred stock -
Series 2001B convertible preferred stock -
Class B preferred stock -
Common stock 5,073,783
Deferred Compensation (283,333)
Accumulated deficit (6,680,451)
-----------
Total stockholders' deficiency (1,847,531)
-----------
Total liabilities and
stockholders' deficiency $ 1,967
===========
See accompanying notes to the condensed consolidated financial
statements.
1
Biochem Solutions, Inc.
And Subsidiary
(A Development Stage Company)
Condensed Consolidated Statements of Operations
(Unaudited)
Three Three
Months Months
Ended Ended
June 30, 2006 June 30, 2005
-----------------------------------
Gross Revenues $ - $ -
Cost of Sales - -
-----------------------------------
Net revenue - -
Operating Expenses 118,289 216,415
-----------------------------------
Loss from Operations (118,289) (216,415)
Other Income (Expenses):
Other income - -
Interest expense (10,750) (18,995)
-----------------------------------
Total other income
(expense) (10,750) (18,995)
Net loss $ (129,039) $ (235,410)
===================================
Loss Per Common Share:
Basic and diluted $ (4.43) $ (8.38)
===================================
Weighted Average Common Shares
Outstanding:
Basic and diluted 29,112 28,096
===================================
See accompanying notes to the condensed consolidated financial
statements.
2
Biochem Solutions, Inc.
And Subsidiary
(A Development Stage Company)
Condensed Consolidated Statements of Operations
(Unaudited)
Cumulative for
Six Six the period from
Months Months March 23,1999
Ended Ended (inception) to
June 30, 2006 June 30, 2005 June 30, 2006
------------------------------------------------
Gross revenues $ - $ - $ 45,744
Cost of sales - - 264
------------------------------------------------
Net revenue - - 45,480
Operating Expenses 240,239 407,614 5,884,630
Other income(expenses):
Other income 0 1,390 219,657
Interest expense (21,250) (19,449) (520,931)
Impairment of Assets 0 0 (315,027)
Provision for loss on
non-cancellable Lease 0 0 (225,000)
------------------------------------------------
Total other income
(expense) (21,250) (18,059) (841,301)
------------------------------------------------
Net Loss $ (261,489) $ (425,673) $ (6,680,451)
================================================
Loss per common share:
Basic and Diluted $ ( 8.98) $ (601.30)
==============================
Weighted average common shares
outstanding:
Basic and Diluted 29,111 471
==============================
See accompanying notes to the condensed consolidated financial
statements.
3
Biochem Solutions, Inc.
And Subsidiary
(A Development Stage Company)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Cumulative for
Six Three the period from
Months Months March 23,1999
Ended Ended (inception) to
June 30, 2006 June 30, 2005 June 30, 2006
------------------------------------------------
Cash flows from operating activities
Net Loss $ (261,489) $ (425,673) $ (6,680,451)
Adjustments to reconcile net loss to net
cash used in operating activities
Forgiveness of related party note
payable - - (59,088)
Depreciation and amortization 713 583 296,543
Loss on impairment of assets - - 315,027
Provision for loss on non-cancelable
leases - - 225,000
Bad Debt Expense - - 42,000
Intrinsic Value of Stock Options - - 500,000
Common stock issued for services - - 2,455,405
Amortization of Deferred Compensation 100,000 100,000 316,667
Increase(decrease) in cash caused by
changes in:
Other current assets - 171 -
Accounts payable 10,526 (713) 197,104
Accrued expenses 141,250 236,995 985,513
Due from related parties - 84,378 528,642
------------------------------------------------
Net cash used in operating activities (8,999) (4,259) (877,637)
Cash flows from investing activities:
Acquisition of property and equipment - (1,700) (279,199)
Cash flows from financing activities
Repayment of note payable to related party - - (200,000)
Proceeds from issuance of preferred stock - - 49,000
Proceeds from issuance of capital stock - - 1,056,348
Due to related parties - - (399,353)
Issuance of Note Receivable (42,000)
Payment for Preferred Stock (32,000)
Repayment/proceeds of notes payable 9,000 - 724,881
------------------------------------------------
Net cash from provided by financing
activities 9,000 - 1,156,876
------------------------------------------------
Net increase(decrease) in cash $ 1 $ (5,959) $ 41
Cash at beginning of period 40 6,329 0
------------------------------------------------
Cash at end of period $ 41 $ 370 $ 41
================================================
See accompanying notes to the condensed consolidated financial
statements.
4
Biochem Solutions, Inc.
And Subsidiary
(A Development Stage Company)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Cumulative for
Six Three the period from
Months Months March 23,1999
Ended Ended (inception) to
June 30, 2006 June 30, 2005 June 30, 2006
------------------------------------------------
Supplemental disclosure of cash flow
information:
Cash paid for interest $ - $ - $ 33,495
============= ============= ===============
Non-cash activity:
Purchase of intangible assets from
related party $ - $ - $ 399,353
============= ============= ===============
Reduction of capital lease
obligation upon abandonment of assets $ - $ - $ 65,006
============= ============= ===============
Satisfaction of Notes Payable and accrued
interest by Third Party $ - $ - $ 487,500
============= ============= ===============
See accompanying notes to the condensed consolidated financial
statements.
5
Biochem Solutions, Inc.
And Subsidiary
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(1) Statement of Information Furnished
The accompanying unaudited condensed consolidated
financial statements as of June 30, 2006 and for the
cumulative period from March 23, 1999 (Inception) to June
30, 2006 have been prepared in accordance with accounting
principles generally accepted in the United States of
America for interim financial information and pursuant
with the rules and regulations of the Securities and
Exchange Commission for Form 10-QSB. Accordingly, the
condensed consolidated financial statements do not include
all the information and notes to the financial statements
required by accounting principles generally accepted in
the United States of America for complete financial
statements. In the opinion of management, the
accompanying unaudited condensed consolidated financial
statements contain all adjustments (consisting of only
normal recurring adjustments) considered necessary for a
fair presentation of Biochem Solutions, Inc. and
Subsidiary's financial position, results of operations,
and cash flows for the periods presented. These results
have been determined on the basis of accounting principles
generally accepted in the United States of America and
applied consistently with those used in the preparation of
the Company's financial statements.
The results of operations for the interim periods ended
June 30, 2006 and 2005 are not necessarily indicative of
the results to be expected for the full year. These
interim financial statements should be read in conjunction
with the December 31, 2005 financial statements and
related notes included in the Company's Annual Report on
Form 10-KSB for the year ended December 31, 2005.
Going Concern
The accompanying condensed consolidated financial
statements have been prepared on a going concern basis,
which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of
business. Due to its past financial difficulties, the
Company has accumulated debt, including judgments and
accrued interest, of approximately $ 1,850,000 relating to
its current and former lines of business and maintains
these on its balance sheet as current liabilities.
Interest on these balances is accruing at a rate of
approximately $11,000 per quarter as of June 30, 2006. The
Company is continuing in its efforts to resolve these
obligations and others through settlements. However,
there is no assurance that the Company will be able to
settle in terms agreeable to the Company and if it does
not do so, this will raise substantial doubt as to its
ability to continue as a going concern. As shown in the
condensed consolidated financial statements, the Company
has incurred cumulative losses of approximately $
6,700,000 during its development stage.
The Company's continuation as a going concern is uncertain
and dependent upon obtaining additional source of
financing and achieving future profitable operation, the
outcome of which cannot be predicted at this time.
The condensed consolidated financial statements do not
include any adjustments to reflect the possible future
effects on the recoverability and classification of assets
or the amounts and classification of liabilities that may
result from the possible inability of the Company to
continue as a going concern.
(2) Summary of Significant Accounting Policies
The accounting policies of the Company are in accordance with
U.S. GAAP and their basis of application is consistent with
that of the previous year.
Recent Accounting Pronouncements
In December 2004, the Financial Accounting Standard Board
("FASB") issued Statement of Accounting Standards ("SFAS")
No. 123 (revised 2004), "Share-Based Payment" ("SFAS No.
123R"). SFAS No. 123R requires the Company to measure the
cost of employee services received in exchange for an award
of equity instruments based on the grant-date fair value of
the award. The cost of the employee services is recognized as
compensation cost over the period that an employee provides
service in exchange for the award. SFAS No. 123R will be
effective January 1, 2006 for the Company and may be adopted
using a modified prospective method or a modified
retrospective method. The Company has not yet completed an
analysis to quantify the exact impact the new standard will
have on its future financial performance. Depending upon the
extent to which the Company implements share-based
compensation plans. Adoption of this statement could have a
material impact on the Company's future consolidated
financial statements.
In December 2004, the FASB issued SFAS No. 153, "Exchanges of
Non-Monetary Assets - an amendment of the Accounting
Principles Board (APB) Opinion No. 29" (Statement 153). This
statement amends Opinion 29 to eliminate the exception for
non-monetary exchanges of similar productive assets and
replaces it with a general exception for exchanges of
non-monetary assets that do not have commercial substance. A
non-monetary exchange has commercial substance if the future
cash flows of the entity are expected to change significantly
as a result of the exchange. The adoption of this standard
is not expected to have a material impact on the Company's
results of operations or financial position.
In March 2005, the FASB issued FASB Staff Position ("FSP")
No. 46(R)-5, "Implicit Variable Interests under FASB
Interpretation No. ("FIN") 46 (revised December 2003),
Consolidation of Variable Interest Entities" ("FSP FIN
46R-5"). FSP FIN 46R-5 provides guidance for a reporting
enterprise on whether it holds an implicit variable interest
in Variable Interest Entities ("VIEs") or potential VIEs when
specific conditions exist. This FSP is effective in the first
period beginning after March 3, 2005 in accordance with the
transition provisions of FIN 46 (Revised 2003),
"Consolidation of Variable Interest Entities - an
Interpretation of Accounting Research Bulletin No. 51" ("FIN
46R"). The adoption of this standard is not expected to have
a material impact on the Company's results of operations and
financial position.
In March 2005, the FASB issued Interpretation No. 47,
"Accounting for Conditional Asset Retirement Obligations"
("FIN 47"), which will result in (a) more consistent
recognition of liabilities relating to asset retirement
obligations, (b) more information about expected future cash
outflows associated with those obligations, and (c) more
information about investments in long-lived assets because
additional asset retirement costs will be recognized as part
of the carrying amounts of the assets. FIN 47 clarifies that
the term "conditional asset retirement obligation" as used in
SFAS 143, "Accounting for Asset Retirement Obligations,"
refers to a legal obligation to perform an asset retirement
activity in which the timing and/or method of settlement are
conditional on a future event that may or may not be within
the control of the entity. The obligation to perform the
asset retirement activity is unconditional even though
uncertainty exists about
6
Biochem Solutions, Inc.
And Subsidiary
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(2) Summary of Significant Accounting Policies (cont'd)
the timing and/or method of settlement. Uncertainty about the
timing and/or method of settlement of a conditional asset
retirement obligation should be factored into the measurement
of the liability when sufficient information exists. FIN 47
also clarifies when an entity would have sufficient
information to reasonably estimate the fair value of an asset
retirement obligation. FIN 47 is effective no later than the
end of fiscal years ending after December 15, 2005.
Retrospective application of interim financial information is
permitted but is not required. Early adoption of this
interpretation is encouraged. The adoption of this standard
is not expected to have a material impact on the Company's
results of operations and financial position.
In May 2005, the FASB issued SFAS No. 154, "Accounting
Changes and Error Corrections" ("SFAS 154"), which replaces
Accounting Principles Board ("APB") Opinion No. 20,
"Accounting Changes", and SFAS No. 3, "Reporting Accounting
Changes in Interim Financial Statements - An Amendment of APB
Opinion No. 28". SFAS No. 154 provides guidance on the
accounting for and reporting of changes in accounting
principles and error corrections. SFAS No. 154 requires
retrospective application to prior period financial
statements of voluntary changes in accounting principle and
changes required by new accounting standards when the
standard does not include specific transition provisions,
unless it is impracticable to do so. SFAS No. 154 also
requires certain disclosures for restatements due to
correction of an error. SFAS No. 154 is effective for
accounting changes and corrections of errors made in fiscal
years beginning after December 15, 2005, and is required to
be adopted by the Company as of January 1, 2006. The impact
that the adoption of SFAS No. 154 will have on the Company's
results of operations and financial condition will depend on
the nature of future accounting changes adopted by the
Company and the nature of transitional guidance provided in
future accounting pronouncements. In January 2003, the
Financial Accounting Standards Board ("SFAS") issued SFAS
Interpretation No. 46 "Consolidation of Variable Interest
Entities", an interpretation of ARAB No. 51 ("FIN 46"). The
SFAS issued a revised FIN 46 in December 2003 which modifies
and clarifies various aspects of the original
interpretations. A Variable Interest Entity ("VIE") is
created when (I) the equity investment at risk is not
sufficient to permit the entity to finance its activities
without additional subordinated financial support from other
parties or (ii) equity holders either (a) lack direct or
indirect ability to make decisions about the entity, (B) are
not obligated to absorb expected losses of the entity or (C)
do not have the right to receive expected residual returns of
the entity if they occur. If an entity is deemed to be a VIE,
pursuant to FIN 46, an enterprise that absorbs a majority of
the expected losses of the VIE is considered the primary
beneficiary and must consolidate the VIE. For VIEs created
before January 31, 2003, FIN 46 was deferred to the end of
the first or annual period ending after March 15, 2004. The
adoption of FIN 46 is not expected to have a material impact
on the financial position or results of operations of the
Company.
(3) Acquisition of Grupo Industrial N.K.S., S.A., de CV &
Restructuring of the Company
As of March 15, 2005, the Company has completed a transaction
resulting in the acquisition of 75% of all issued and
outstanding shares of NKS. The Company and stockholders of
NKS have mutually agreed that the Company will acquire 75% of
all the shares of NKS in exchange for 250,000,000 of the
Company's common restricted shares. NKS, a Mexican
corporation, is the owner of a steel mill foundry and other
assets in Lazaro Cardenas, Mexico. The Company has chosen not
to show any asset value for NKS on its Balance Sheet. In
addition, the Company issued 30 million shares of common
stock to an unrelated party as a finder's fee. No value has
been attributed to the finder fee.
NKS is currently insolvent and their financial records are
not available at this time. As a result, the Company is
unable to consolidate the results of operations of NKS into
the accompanying condensed consolidated financial statements.
The investment in NKS has been valued at $0 at June 30, 2005.
The Company is currently working with its financial advisors
in Mexico to obtain a formal valuation, which will be
disclosed in future filings.
The Company does not consolidate the financial position or
the statement of operations of its NKS subsidiary.
On June 16, 2006, the Company announced that by Consent to
Act in Lieu of a meeting of the shareholders, the majority of
the shareholders of record voted and approved to unwind the
share exchange with Grupo Industrial NKS SA de CV. The
250,000,000 shares issued to NKS shareholders will be
voluntarily returned in exchange for the 75% of the NKS
shares held by NorMexSteel and the 250,000,000 NorMexSteel
shares will be cancelled and returned to treasury. In
conjunction with this the shareholders approved to remove and
replace the existing board of directors; to file amendments
to the articles of Incorporation of the company that would
effect a name change to BioChem Solutions Inc. and a reverse
stock split of the Company's common stock of 1 for 10,000.
Under the guideline of the regulatory and company act
requirements the majority of shareholders agreed to the need
and ratio of the reverse stock split and the majority agreed
that the restructuring is in the best interest of the
company. The net effect of the reverse stock split will
reduce the Company's outstanding shares of common stock post
split to 29,066 shares (no fractional shares will be issued).
The stock split is effective as of June 30, 2006.
Shareholders of record will be notified by the Company's
transfer agent and may exchange their old shares of common
stock for new shares of common stock post reverse.
On June 16, 2006, the Company entered into a contract to
acquire an Exclusive Rights and a Master License providing
all the rights in a patented biochemical, Trioxolane, and
other patents held by the CKD Foundation, the CKD Foundation
will appoint five new directors to the board of directors.
BioChem Solutions Inc. under the Master License from the
patent holder, the CKD Foundation, will provide funding on a
best efforts basis for the further development of the patents
and applications and related products. BioChem Solutions Inc.
expects to schedule the third stage Clinical trials for
treatment HIV / AIDS.
8
Biochem Solutions, Inc.
And Subsidiary
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(4) Capital Stock
(a) Common Stock
Authorized
1,000,000,000 shares June 30, 2006
-------------
Issued and outstanding
29,127 shares of common stock $ 5,073,783
-------------
During 2004 , the Company entered into an agreement with the
CFO whereby 200,000 common shares were granted for consulting
services at the inception of the agreement. The CFO is
entitled to a further 100,000 common shares at the end of the
second year of the term of this agreement and a further
100,000 common shares at the end of the third year of the
term of this agreement. For the three months ended June 30,
2006, $50,000 of which has been charged as compensation
expense included in Operating Expenses in the accompanying
condensed consolidated statements of operations.
On September 29, 2005 the Company's Board approved a 1:500
forward split after completing a 500:1 reverse stock split on
September 9, 2005 as approved by the majority of the
shareholders.
On June 29, 2006, the Company's Board approved a 1 for 10,000
reverse split, reducing the number of shares from
approximately 290,974,000 to 29,127.
(b) Preferred Stock
Authorized
150,000,000
June 30, 2005
Issued and outstanding -------------
Series 2001 - 22,100 shares of preferred stock $ 42,470
Series 2001A - 27,488,000 shares of preferred stock -
Series 2001B - 30,000,000 shares of preferred stock -
-------------
Total 57,510,100 shares of preferred stock $ 42,470
-------------
(5) Related Party Transactions
The president, current and former principal stockholders, and
certain employees from time to time made advances or loans to
the Company. The advances and loans have been made for
financing and working capital purposes. At June 30, 2006,
the total of such advances and loans, including accrued
interest, was $269,554.
The Company entered into an unsecured funding agreement with
Tropical Ventures/Cazador Enterprises, a shareholder of the
Company, whereby Tropical will lend the Company funds under
the following terms; interest on outstanding amounts of 10%
per annum payable to Cazador Enterprises, a 10% funding fee
paid to Tropical Ventures on any drawdown, and no fixed
repayment terms. As of June 30, 2006, the Company had
borrowed $155,000 less fees of $20,000 provided through this
agreement.
(6)Accrued Liabilities
Accrued expenses at June 30, 2006 consisted of the following:
2006
--------------
Accrued lease obligations $ 395,996
Accrued interest 176,053
Accrued Professional Fees 421,659
--------------
$ 982,958
==============
(7) Notes Payable
The notes payable bear interest at rates that range between 9
and 12 percent per annum and are due on demand.
9
Biochem Solutions, Inc.
And Subsidiary
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(8) Notes Payable - Related Party
The related party notes payable bears an interest rate of
10 percent per annum and has no fixed terms of repayment.
(9) Stock Options
During 2004, the Company established a stock option plan
under which options to purchase shares of common stock may be
granted to employees, directors, officers, agents,
consultants and independent contractors.
During November 2004, the Company granted 1,000,000 stock
options to the Company's Chief Financial Officer. The
options have an exercise price of $1.00, vest immediately,
and have a term of three years. At the grant date, these
options had an intrinsic value of $500,000. These options
remain outstanding at June 30, 2006, are fully exercisable,
and have a remaining term of 17 months.
(10) Income Taxes
The Company accounts for income taxes in accordance with SFAS
No. 109, "Accounting for Income Taxes". SFAS No. 109
prescribes the use of the liability method whereby deferred
tax asset and liability account balances are determined based
on differences between financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax
rates. The effects of future changes in tax laws or rates are
not anticipated.
Under SFAS No. 109 income taxes are recognized for the
following: a) amount of tax payable for the current year, and
b) deferred tax liabilities and assets for future tax
consequences of events that have been recognized differently
in the financial statements than for tax purposes.
For three month period ended June 30, 2006, the Company had
approximately $6,700,000 net operating loss carry forwards
for income tax reporting purposes, which can be utilized to
decrease the current year's income taxes. No tax benefit was
reported in the current period because the Company believed
that there was a 50% or greater chance the carryforwards
would expire unused. Accordingly, the potential benefit of
the loss carryforwards were offset by a valuation allowance.
11) Commitments and Contingencies
Several creditors have taken legal action against the Company
due to defaulted debt and lease obligations. The judgments
total approximately $378,000. These amounts are included in
accrued liabilities as at June 30, 2006.
10
Biochem Solutions, Inc.
And Subsidiary
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
(12) Subsequent Transactions
There are no subsequent transactions to report.
11
Item 2. Management Discussion and Analysis and Plan of Operation
--------------------------------------------------------
All statements contained herein that are not historical facts,
including but not limited to, statements regarding the
anticipated future capital requirements and future development
plans are based on current expectations. These statements are
forward looking in nature and involve a number of risks and
uncertainties. Actual results may differ materially. Among the
factors that could cause actual results to differ materially are
the following: amount of revenues earned by the Company's
operations; the availability of sufficient capital to finance the
Company's business plan on terms satisfactory to the Company;
general business and economic conditions; and other risk factors
described in the Company's reports filed from time to time with
the Commission. The Company wishes to caution readers not to
place undue reliance on any such forward looking
statements, which statements are made pursuant to the Private
Securities Litigation Reform Act of 1995 and, as such, speak only
as of the date made.
Results of Operations
---------------------
Three Months Ended June 30, 2006 versus Three Months Ended June
30, 2005.
----------------------------------------------------------------
We had no revenues for the three months ended June 30, 2006 and
2005. There is no assurance that we will any have revenues in
2006. As we had no sales in this quarter, we had no cost of
sales for the quarters.
Operating expenses for the three months ended June 30, 2006 were
$118,289 compared to $ 216,415 for the three months ended June
30, 2005. Other income for the three months ended June 30, 2006
was $0 as compared to other income of $0 for three months ended
June 30, 2005. Interest expense was $ 10,750 for three months
ended June 30, 2006 versus $18,995 for the three months ended
June 30, 2005.
The Company's net loss for the three months ended June 30, 2006
was $ 129,039 as compared to a loss of $ 235,410 for the three
months ended June 30, 2005.
Six Months Ended June 30, 2006 versus Six Months Ended June 30,
2005.
---------------------------------------------------------------
We had no revenues for the six months ended June 30, 2006 and
2005. There is no assurance that we will any have revenues in
2006. As we had no sales in this period, we had no cost of sales
for this period.
Operating expenses for the six months ended June 30, 2006 were
$240,239 compared to $ 407,614 for the six months ended June 30,
2005. Other income for the six months ended June 30, 2006 was $0
as compared to other income of $1,390 for the six months ended
June 30, 2005. Interest expense was $ 21,250 for six months
ended June 30, 2006 versus $19,449 for the six months ended June
30, 2005.
The Company's net loss for the six months ended June 30, 2006 was
$ 261,489 as compared to a loss of $ 425,673 for the six months
ended June 30, 2004.
12
Liquidity and Capital Resources
-------------------------------
On June 30, 2006, the Company had a working capital deficit of
approximately $ 1,850,000. Since its inception, the Company has
continued to sustain losses. The Company's operations since
inception have been funded by the sale of common and preferred
stock, and proceeds from both secured and unsecured loans. These
funds have been used for working capital and capital expenditures
and other corporate purchases. The Company has had losses of
approximately $ 6,680,000 since inception. The Company is seeking
financing through equity financing. There can be no assurance
that the Company will be able to obtain funding at terms
acceptable to the Company. These factors indicate that the
Company may not be able to continue as a going concern.
Recent Accounting Pronouncements
--------------------------------
In December 2004, the FASB issued SFAS No. 123 (revised 2004),
Share-Based Payment ("FAS 123(R)"), a revision of SFAS No. 123
("FAS 123"). For small business issuers, this Statement must be
implemented at the beginning of the fiscal year that begins after
December 15, 2005. This Statement establishes standards for the
accounting for transactions in which an entity exchanges its
equity instruments for goods or services and addresses
transactions in which an entity incurs liabilities in exchange
for goods or services that are based on the fair value of the
entity's equity instruments or that may be settled by the
issuance of those equity instruments. FAS 123 focuses primarily
on accounting for transactions in which an entity obtains
employee services in share-based payment transactions. The
original pronouncement, issued in October 1995, defined a fair
value based method of accounting for share-based payments, but
permitted companies to disclose such payments either employing
the fair value based method of accounting or by using the
intrinsic value method as defined by APB No. 25, Accounting for
Stock Issued to Employees. For companies reporting under the
intrinsic value method, FAS 123 required a pro forma footnote
disclosure of the impact of the fair value based method for
financial reporting purposes. The 2004 revision to FAS 123, FAS
123(R), eliminates the intrinsic value method as provided by APB
No. 25. Depending upon the extent to which the Company
implements share-based compensation plans, adoption of this
statement could have a material impact on the Company's future
consolidated financial statements.
Off-Balance Sheet Arrangements
------------------------------
The Company does not maintain off-balance sheet arrangements nor
does it participate in non-exchange traded contracts requiring
fair value accounting treatment.
13
Item 3. Controls and Procedures
-----------------------
In accordance with Exchange Act Rules 13a-15 and 15d-15, the
Company's management carried out an evaluation with the
participation of the Company's Chief Executive Officer and Chief
Financial Officer, its principal executive officer and principal
financial officer, respectively, of the effectiveness of the
Company's disclosure controls and procedures as of the end of the
period covered by this report. Based upon that evaluation, the
Chief Executive Officer and Chief Financial Officer concluded as
of the end of the period covered by this Form 10-QSB that the
Company's disclosure controls and procedures are effective in
timely alerting them to material information relating to the
Company required to be included in periodic reports filed under
the Securities Exchange Act of 1934, as amended. There were no
changes in the Company's internal controls over financial
reporting identified in connection with the evaluation by the
Chief Executive Officer and Chief Financial Officer that occurred
during the Company's fourth quarter that have materially affected
or are reasonably likely to materially affect the Company's
internal controls over financial reporting.
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
-----------------
Due to our financial difficulties, we defaulted on a number of
debt and lease obligations. We have several judgments totaling
approximately $378,000 that were entered against us. We are
currently trying to resolve these obligations through
settlements. However, there is no assurance that we will be able
to settle on terms favorable to us and if we are unable to do so,
this will have a material adverse affect on our ability to
operate properly in the future.
On May 3, 2004, we received a letter from Pedro Fenando Arizpe
Carreon, a shareholder of Grupo Industrial NKS, S.A. DE C.V.
("NKS"), addressed to Montague Securities International, Ltd.,
the escrow agent for the transaction by which we acquired 75% of
the outstanding shares of capital stock of NKS. Mr. Carreon
alleged that we had breached the Purchase Agreement. We have
denied any breach of the purchase agreement and have advised Mr.
Carreon in writing of this fact. On August 8, 2005, Biochem
Solutions filed a civil complaint, in Broward County, Florida,
against Mr. Carreon and Grupo Industrial NKS alleging breach of
contract and tortuous interference with a business relationship
and requested the court to order temporary and permanent
injunctive relief, declaratory judgment and monetary damages for
the alleged interferences.
In the United States District Court in the Southern District of
California in San Diego, California, denied the Company's motion
for a preliminary injunction in NorMexSteel, Inc., et al. v.
Charles B. Flynn, et al., Case Number 06-CV-0814, filed on April
2, 2006. In the order dated June 6, 2006, the District Court
reversed its tentative ruling. The District Court's Findings of
Fact and Conclusions of law Denying Plaintiffs' Motion for
Preliminary Injunction (the "Order") stated that: "Although in
its tentative ruling the Court stated that it would order that
Defendants Baiaverde and Taurus place the allegedly stolen shares
in the registry of the Court pending resolution of the matter, it
has reconsidered. Upon further review, the Court finds that
NorMex does not own the stock at issue here." In the Order, the
District Court denied the Plaintiffs' requested relief.
14
Item 2. Change in Securities
--------------------
On September 10, 2004, the holders of a majority of the Company'
outstanding voting shares executed a written consent amending the
Company's Articles of incorporation to increase the total number
of authorized shares of the Company's Common Stock from
500,000,000 to 1,000,000,000.
As of March 15, 2005, the Company completed a transaction
resulting in the acquisition of 75% of all issued and outstanding
shares of Grupo Industrial N.K.S., S.A., de CV ("NKS") in
exchange for 250,000,000 of the Company's common restricted
shares. NKS, a Mexican corporation, is the owner of a steel mill
foundry and other assets in Lazaro Cardenas, Mexico.
On September 29, 2005 the Company's Board approved a 1:500
forward split after completing a 500:1 reverse stock split on
September 9, 2005 as approved by the majority of the
shareholders.
On June 29, 2006, the Company's Board approved a 1 for 10,000
reverse split, reducing the number of shares from approximately
290,974,000 to 29,127.
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable
Item 5. Subsequent Events
-----------------
Not applicable
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits and Index of Exhibits
31. Rule 13a-14(a)/15d-14(a) Certifications pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32. Section 1350 Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K.
On September 16, 2004, the Company filed a current
report on Form 8-K in connection with the following:
(i) as of September 10, 2004, the Company has finalized
the Letter of Intent to originally acquire 100% of all
classes of shares issued and outstanding of Grupo
Industrial N.K.S., S.A., de CV, a Mexican corporation;
(ii) on September 10, 2004, the holders of a majority
of the Company' outstanding voting shares executed a
written consent, amending the Company's Articles of
incorporation to increase the total number of
authorized shares of the Company's Common Stock from
500,000,000 to 1,000,000,000, and
(iii) on March 15, 2005, the Company
completed the purchase of 75% of all outstanding
shares on NKS.
15
SIGNATURES
Biochem Solutions Inc.
By: /s/ James Herman
-----------------------------
James Herman, President
Date: November 16, 2006
16